Monday, March 24, 2014

For Investors Only -- The Story In Venezuela Looks Fairly Dire

Reuters is reporting:
Schlumberger Ltd, the world's largest oilfield services company, said on Monday it expects first-quarter earnings to be much higher than in the same period last year, as it takes market share from rivals and cuts costs.
Much of the growth will come from state-owned and independent energy companies that are spending to develop shale and other resources around the world, rather than multinational energy companies, most of whom are cutting spending, Schlumberger Chief Executive Paal Kibsgaard said at an energy conference in New Orleans.
Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or think you may have read here. 

Houston channel closure is quite significant; it will be interesting to see if it affects the price of gasoline in the US or Europe. Reuters is reporting:
The closure of the channel on Saturday has led to a queue of more than 80 vessels trying to move into or out of the Gulf of Mexico. Shipping delays forced Exxon Mobil Corp to cut production at its largest refinery.
Exxon said production at its 560,500 barrel per day Baytown, Texas, refinery had been cut on Monday due to the closure of the Houston Ship Channel. The company expects further production cuts by mid-week if the channel remains shut.
Weatherford is cutting back operations in Venezuela; the situation looks fairly dire. I don't watch CNBC. I wonder if the Venezuela story is getting as much air time as the Greek story did all last year? Reuters is reporting:
Oilfield services provider Weatherford International Ltd said on Monday it was reducing operations in Venezuela and expects its Russian business to grow this year. The Swiss-headquartered company, which competes with Schlumberger and Halliburton, said the "serious liquidity situation in Venezuela" is causing it to pare back services it provides inside the OPEC country, Chief Executive Bernard Duroc-Danner said at the Howard Weil conference in New Orleans on Monday.
Reuters is also reporting (blogged earlier; the proposed route is quite interesting):
MDU Resources Group Inc is looking for more natural gas producers to sign up to use capacity on a planned $650 million pipeline that would transport the fuel through North Dakota to Minnesota, the company's chief executive said on Monday.
The company in January launched a 120-day period for prospective customers of the pipeline to sign supply agreements to transport natural gas.
"We're encouraged by the reaction of the marketplace, but I'd be getting ahead of myself if I said we're ready to build" the pipeline, Dave Goodin, MDU's chief executive, said during an interview at the Howard Weil energy conference in New Orleans.
"We need some binding commitments." Goodin declined to specify how much business the proposed pipeline has inked so far. Given that roughly a third of all natural gas produced in North Dakota's Bakken shale is flared, pressure has been strong from political and environmental groups to build new pipelines. Yet with the cost of natural gas near decade-lows, producers have been reluctant to spend significant amounts of money to address the issue.

Bakken Economy: Energy Impact Grants Of $11 Millions For Watford City/McKenzie County Public School District Infrastructure For New High School

The Bismarck Tribune is reporting:
The Board of University and School Lands Monday awarded an energy impact grant of $8 million to Watford City and the McKenzie County Public School District for street, water and sewer infrastructure that will support the construction of a new high school and residential development.
The Land Board also committed to providing another $3 million in grants next year to help cover the utility construction costs.

All This Talk Of Liquid Natural Gas Export: Political Theater


March 26, 2014: some background links --
Original Post 

Flashback, February 26, 2014: President Obama said he would make a decision on Keystone XL pipeline "in a couple of months."

It's been a month. One more month to go. LOL.

On another note, the US approves a permit for a seventh (7th) LNG export terminal. The Wall Street Journal is reporting:
The Obama administration's approval of a seventh application to export natural gas drew cautious praise from a number of U.S. lawmakers who have been putting pressure on President Barack Obama to allow more gas exports as a way to weaken Russia's power over Ukraine.
"I am proud that the U.S. Department of Energy has heeded my calls to speed its approval of pending liquefied-natural-gas export terminals," Sen. Mark Udall, (D., Colo.) said in a statement following the Energy Department's announcement Monday that it was granting conditional approval for Jordan Cove, a proposed project to export natural gas out of Oregon.
"This newly approved LNG [liquefied natural gas] terminal is a step in the right direction, but there is more to do. I will keep fighting to ensure the White House continues to prioritize the development and approval of additional natural-gas export facilities."
Mr. Udall's statement is notable because he is one of a number of Democrats facing a tough re-election fight this year, and Republicans have targeted his seat as they try to capture a majority of the Senate. Mr. Udall hasn't always been so outspoken on this issue and he is widely viewed as aligned with environmentalists and renewable-energy interests just as much, if not more, than the natural-gas sector.
Mr. Udall will face Rep. Cory Gardner, (R., Colo.), who recently announced his candidacy.
Jordan Cove is the seventh application, of more than 20, to receive the Energy Department's conditional approval, which allows the project to move forward but doesn't guarantee it will.
Only one project has final federal approval to export natural gas and it is expected to begin doing so in late 2015. Before Jordan Cove and the other five projects that have won conditional approval can be built, they must get final clearance from the Federal Energy Regulatory Commission.
This is all political theater. Putin's move into the Crimean is measured in hours; his move into the Ukraine is measured in days, maybe weeks. Meanwhile, the earliest any of our natural gas will be exported is late 2015. This is all political theater.

However, as I told Don, I think this is incredibly ironic. Obama is doing everything he can to slow down fossil fuel development in this country and now it's Putin that's finally forcing Obama to approve some LNG exports.

In fact there are something like 20 permits waiting to be approved and the new DOE secretary said some time ago that he was going to expedite LNG permit approval, so Obama is simply using the Crimean "crisis" as cover for approving more LNG permits. Approving #7 is probably not that big a deal. It will probably be a drop in the barrel compared to all the NG that Russia could export/embargo if they want.
But I get a kick out of this. Things are moving quickly, all of a sudden, internationally. It looks like Mr Putin will invigorate the fossil fuel sector in this country -- even as Mr Obama keeps trying to slow it down.

The next thing we will see is the "need to approve the Keystone in light of the Russian aggression."

For Investors Only -- Volatility Of EOG; Ten (10) New Permits -- The Williston Basin, North Dakota, USA

EOG lost $2.00 (1% before market close) but after market trading EOG was up $3.00 (1.7%).  CLR was down today, but nothing particularly remarkable; the divorce news that came out Friday might have had some effect. The Bakken operators I looked at were all down today; Oasis down 4%.

Oil was pretty much flat today, right at $99.

Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you might have read here.

Active rigs:

Active Rigs197187206171103

Ten (10) new permits --
  • Operators: CLR (4), XTO (3), OXY USA (2), Cornerstone
  • Fields: Elm Tree (McKenzie), Tioga (Williams), Manning (Dunn), Customs (Burke)
  • Comments:
Wells coming off the confidential list the past three days were posted earlier; see sidebar at the right.

Wells coming off the confidential list Tuesday:
  • 25170, 397, Baytex, Pulv 32-29-162-99H 1NC, Ambrose, t10/13; cum 34K 1/14;
  • 26006, 2,928, BR, Archer 24-25MBH, Charlson, t2/14; cum -- ICO
  • 26033, drl, Cornerstone, Hinds C-0631-6190, Northeast Foothills, no production data,
  • 26361, drl, XTO, Rink 13X-4B, Garden, no production data,

Update On Reef Oil & Gas

Earlier I posted a note regarding Reef Oil & Gas. The company was nice enough to forward me a copy of the full press release, dated March 17, 2014:
Reef Oil & Gas Companies announces favorable results of recent drilling operations in the Bakken-Three Forks formation in North Dakota.
These operations are part of the initial phase of the Reef Oil and Gas Drilling and Income Fund, L.P. We are pleased with the results of the funds first project, says Michael Mauceli, CEO of Reef.
The first six wells have been drilled and tested and we are now in the completion phase, he continues, and although we are still in the early stages of this program, we anticipate achieving positive results throughout the entire drilling operation. Conoco-Phillips has completed testing of the projects first six wells and is currently running production tubing and installing the production facilities.
Initial oil production test rates have been published for three of the wells at 2,312 and 2,592 and 2,880 barrels per day and a combined natural gas test rate of more than 10 million cubic feet per day.
These operations are part of a Reef-sponsored partnership called the Reef Oil & Gas Drilling and Income Fund, L.P., which was formed to drill and own interests in oil and natural gas properties located in the United States with a focus primarily on the Bakken-Three Forks in North Dakota.
The primary purpose of the partnership is to generate revenue from the production of oil and gas, and provide partners with cash distributions and available tax benefits.
Within the last few years, Reef has taken advantage of several opportunities to make acquisitions in the Bakken-Three Forks.
Reef and its partnerships own interests in more than 10% (822 wells) of all wells drilled to date in the Bakken-Three Forks. Reef and its partnerships have also participated in the drilling of more than 400 wells in the Bakken-Three Forks since the fourth quarter of 2011. The Bakken-Three Forks formation is one of the largest contiguous deposits of oil and natural gas surveyed by the U.S. Geological Survey (USGS).
That's pretty impressive: more than 400 Bakken-Three Forks wells since 2011. And it's pretty impressive that Reef owns interests in more than 10% of all wells drilled to day in the Bakken-Three Forks. I would assume that means Reef is "partnering" with more operators in the Williston Basin than just COP (BR).

A big "thank you" to the company marketing director to send me the press release.  It is much appreciated.

Grail Oil Field Has Been Updated

I track the Grail oil field here.

Since I last updated the Grail oil field, six (6) permits have been canceled (three Otis permits and four Johnson permits). These permits were probably replaced with new permits in slightly new locations or with different targets or perhaps different spacing units.

A screen shot of where the wells of the canceled permits would have been sited (inside the burnt orange circle):

Jobless Rate In Bismarck Rising? Maybe It's Just A Global Warming Thing

MRT is reporting:
Midland was the lone metropolitan statistical area in the nation to post a jobless rate less than 3 percent during the month of January, according to a report released Friday by the Bureau of Labor Statistics.
In December, Midland was tied with Bismarck, ND, and Logan, UT, for the lowest rate at 2.9 percent. The December report marked Midland’s return to the top spot for the first time since April of 2013. During a five-month stretch from December 2012 through April 2013, no community in America posted a lower jobless rate than Midland. It appears Midland is going through a similar stretch.   
Midland’s 2.9 percent jobless rate was easily better than Logan (3.3) and Bismarck (3.4). Odessa (3.6) continues to work its way up the list as it is tied for fifth. Odessa was 12th in December.

If Nothing Else, President Obama Is Very Talented At Holding Up Shovel-Ready Projects

Wow, if there was ever a president who didn't like to see Americans working --

Here we go again, at the very end of this article, FuelFix is reporting that the government is dithering on a approving an Enbridge pipeline to expand another pipeline:
Meanwhile, Enbridge said earlier this year that the feds are taking longer than expected to approve modifications to another presidential permit for a separate project.
The company is hoping to increase capacity of its Alberta Pipeline from 450,000 barrels per day to 800,000 barrels. Wuori said the company had expected to get that approval by July 2014, but now, “that doesn’t look like it’s going to happen.” He said the company thinks July 2015 is more realistic.
Note to Wuori: not going to happen under this administration. Bank your CAPEX money or invest it in tax-advantage wind farms.

FuelFix is also reporting that Enbridge doesn't think it needs the presidential seal of approval to "improve" an existing pipeline. This is quite a story. Enbridge wants to improve a 40-year-old pipeline; activist environmentalists want the president to step in, but if there's a break in the pipeline, the activists will be the first to sue. I think Enbridge has a plan. This is not rocket science.

Meanwhile, for the investor in ENB this is great news. Tight pipeline capacity and delays in replacing pipeline are two "positives" for ENB: a) tight capacity means an increase in rates; b) any delay in laying these pipelines simply allows the company to delay CAPEX. It's not like there's any competition. Oh, the railroads. LOL. The activists don't like the railroads either.

Comment: the blog has been great therapy for me. When I first started blogging I would get upset when I read stories of how President Obama dithered on anything that might put folks back to work. When I think about it, it still bothers me that there are men and women who want to work but cannot find work because of the Obama Jobs Policy.

However, I've taken a page from JFK and no longer worry about things I cannot change. I can't change the Obama Jobs Policy but I can manage my investments better by taking into account OJP. For example, the five-year chart for the company that wants to build the Keystone XL has been absolutely wonderful for investors, from $25 to $45 / share in that time frame and pays 4% dividend year in and year out. The Keystone XL delay has been nothing but good news for TransCanada investors. 

I'm not an investor in TransCanada (never have been, probably never will) but I do invest in Enbridge and that company's five-year chart is even more impressive, from $15/share to$45/share in that time-frame and they, too, pay a nice dividend.

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or think you may have read here. 

By the way, reading Sylvia Nasar's Grand Pursuit has really helped me understand all this economic policy-decision process much better. 

For Investors Only -- MRO To Accelerate Rig Activity In The Bakken; EOG Well Positioned

Early Morning Market

In early trading, the market is up, and oil is right at $100/bbl -- probably helped by the problems in the Houston channel.

Some reports of interest:
  • SRE: trading near it's all-time high
  • MDU: up slightly
  • CVX, COP, XOM: all up slightly; trading as a group
  • PSX: up slightly, despite fact spot oil is up slightly
  • KOG, EOG, OAS, CLR: mixed, but mostly up; OAS is outlier (down)
  • UNP, BRK-B: down
  • ENB, WMB, EPD: mostly up
  • AAPL: up $6.00 (now at $539)
Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or think you may have read here. The companies I follow are not necessarily companies I invest in. For example, I do not invest in AAPL (never have, never will). I thought I woudl never get back into MDU but earlier this year, I finally broke down and bought a bit of MDU (long, not for trading).


Marathon Oil updates progress on strategic priorities for 2014; initiating additional $500 mln share repurchase:
  • President and CEO Lee M. Tillman, at the 2014 Howard Weil conference today in New Orleans, will outline progress the Co has achieved in executing its strategic business plans. In his remarks Tillman will update the status of three key priorities for the Co's 2014 plans, which were announced at its Dec 2013 Analyst Day meeting:  
  • accelerated rig activity in Eagle Ford, Bakken and Oklahoma Woodford; successfully ramped up to 28-rig program in Jan 
  • opened data room for marketing of North Sea businesses with bids due in the second quarter completed second phase of $1 bln share repurchase associated with close of Angola Block 31 divestment; initiating an additional $500 mln share repurchase
Northern Oil & Gas executes on the repurchase of ~ 5% of its outstanding stock since beginning repurchases in August 2013 under its stock repurchase program: As of March 21, 2014, a total of 3,055,280 shares have been repurchased at a total cost of $39.8 million, or an average cost of $13.04 per share.

Over at SeekingAlpha: EOG well positioned in the Bakken and Permian Basin -- the article begins:
EOG is the largest acreage holder and a top producer in the Eagle Ford Shale. It also has one of the best core positions in North Dakota's Bakken. Similarly, the company has an emerging position in the Permian Basin. Altogether, EOG is by far the best-positioned oil company in America. It is the strong position of the company that has enabled it to grow its production by an average of 43% over the past three years.
With regard to the Bakken, the article states --
Bakken has also transformed from a steady development to a high growth play through completion improvements and cost efficiencies. During 2013, the Bakken contributed gross production of 86 MBoed, reflecting an increase of 38 percent.
The successful drilling results in the Three Forks formation have led the company to test additional benches during 2014. It plans to drill 80 net wells this year up from 54 in 2013. The company will be focusing on two areas: the Bakken core and the Antelope extension. During 2013, the average well performance of the Core and Antelope increased by 50 percent from 894 Bopd to 1,342 Bopd by the end of 2013. Similarly, the average cumulative oil production (100 days) also improved by 63 percent.
Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or think you may have read here.


Twelve companies announce increased dividends/distributions including Permian Basin Trust.

The Wall Street Journal

This is the lead story, front page: Apple, Comcast discuss streaming-TV service.  Link here. For folks who have followed the Apple philosophy over the years, this makes complete sense.

Mortgage tax breaks helps the wealthy trade up, rather than boost homeownership. But we already knew that, didn't we?

same-sex marriage on hold in Michigan. Can't the courts get together on this thing? Can't we just get along?

This is not good. Turkey shoots down a Syrian "warplane."

Another oil refiner says it will cut CAPEX: Sinopec.

Ahead of the tape: Shiller metric carries warning for stocks: According to a valuation measure associated with the most famous living student of investment bubbles, stocks are undeniably expensive.

The Los Angeles Times

"Cosmos" recap: the meaning and math of comets.   (A complete recap of last night's show.)
 We get some tying up of loose ends in the final segment. Hooke died and Newton replaced him as president of the Royal Society, and may have destroyed his predecessor’s portrait as a final act of revenge against his rival. Halley died at the ripe old age of 85; legend has it that he called for a glass of wine and drank it before breathing his last. But their intellectual legacy lives on. Tyson gets to wax philosophical now, urging us to “feel the wonder and not the fear” when we contemplate the universe, and marveling at how far human ingenuity has taken us: “The baby in the basket is learning to walk – and to know the cosmos.”
Why Warmists Have Lost Their Way

Mother Jones: One Reason It May Be Harder to Find Flight 370: We Messed Up the Currents, March 21, 2014; the earth's temperature has changed not a bit during this time period; "humans changed the currents?" give me a break. 
Minneapolis Star & Tribune. (article no longer available)
National Geographic: the cover with the Statue of Liberty underwater.

Monday Morning -- Another Spill, Not The Bakken

This is a quick note I sent Don early this morning:  When I went to bed last night (early) I noted that oil futures were down only slightly; this morning, they are up, slightly. I assume that is due to the spill in the Houston channel. Sixty ships are waiting off-shore to unload oil. If the refineries along the coast don't get that oil, gasoline will go up in price, I would assume. Could help Bakken oil, spot price, and Buffett's railroad. (Note: oil futures continue to drift -- like the oil spill, I suppose -- upward.)

Active rigs:

Active Rigs198187206171103

RBN Energy: Cushing crude oil stockpile heads to the coast.
Cushing crude oil inventories have fallen by 28 percent from 42 MMBbl on January 24 to less than 30 MMBbl on March 14, 2014 according to Energy Information Administration (EIA) data. Since the startup of TransCanada’s Cushing Marketlink pipeline at the end of January, outgoing crude pipeline capacity has exceeded inbound supplies at Cushing and the surplus has been headed to the Gulf Coast. Backwardation in the futures market has also encouraged shippers to move supplies out of storage. Today we begin a new series looking at the Cushing exodus and the resultant growing Gulf Coast stockpile.
We have previously blogged about Cushing crude inventory levels – most recently in August of 2013. Cushing is the largest crude storage hub in the US (excluding the strategic petroleum reserve) with a nameplate capacity of about 76 MMBbl (source: Genscape) owned by 14 different private companies. Cushing is also the most active oil trading hub and the delivery point for the CME NYMEX West Texas Intermediate (WTI) Futures contract. WTI also acts as a benchmark for US domestic crude pricing. There are significant flows of crude into Cushing along pipeline routes from Canada, Chicago, the Rockies, the Anadarko basin and the Permian Basin and significant outbound flows on pipelines to refineries in Ohio, Oklahoma, Kansas and Texas as well as major trunk lines to the Gulf Coast.
The dramatic increase in US domestic crude oil production in the past 3 years meant the Cushing hub became the center of an inventory roller coaster as new supplies searched for routes to market. Figure #1 below shows EIA Cushing crude stocks over the period from the start of 2012 through last week (March 14, 2014). At the start of that period Cushing inventories increased from 28 MMBbl in January 2012 to a record 52 MMBbl a year later (green dotted oval on the chart), largely as a result of an excess of supply over refinery capacity in the Midwest.  Those excess supplies came from new domestic production in North Dakota and the Rockies as well as increased Canadian output. The crude surplus could not find it’s way to Gulf Coast refineries because of a lack of pipeline capacity south from Cushing.
A Note to the Granddaughters

(There may be more notes to the granddaughters than usual because my wife is in California and this helps her keep in touch.)

I would say last night's "Cosmos" was even better than week 2. Week 2, if you remember was on DNA, and although they tied it into "Cosmos," the average person might not get the connection. Olivia even talked about that last night. Olivia loved last night's program as did Arianna. Arianna, of course, knew that Halley's comet came every 75 years, though I told her it was 76 years and that was said on "Cosmos." However, looking it up on wiki the correct answer is that Halley's comet comes "every 75 - 76 years."  Splitting hairs. Arianna was as correct as "Cosmos."

Much discussion on Hook, Halley, and Newton. I did not know the history. Very, very good presentation. They said Halley did not discover Halley's comet. Both Arianna and I agreed, not quite accurate. It is true that the ancient Arabs/Turks mentioned that comet, so they discovered it, but it was Halley who noted that different comets described many times over the centuries was the same comet, and it was Halley who discovered they were all one and the same comet. Besides, that comet had his name on it.

Finally, after the program, we discussed:
  • English: star
  • Latin: stella
  • Greek: aster
I noted that "stellar" in English comes from "stella" (star), meaning wonderful. I also mentioned "stellate."

"Cosmos" said ancients associated bad things, plagues, volcanoes, etc, with "bad stars," or comets. Halley's comet preceded the plague, for example. So, "dis" (bad) and "aster" (star) makes for a bad star ("disaster").

I asked the girls what words they could associate with aster. Olivia immediately said "asteroid." Without missing a beat, Arianna said "asterisk." I noted the flower, the aster.

Olivia then changed the subject and went back to "dis" suggesting that it was associated with other words meaning "bad," like "dislike." She said that in a very authoritarian voice, much like Arianna does.